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Key Questions Take Mystery Out Of Insurance

Originally published: 10.01.07 by D. Michael Sherman


If you reflect on how you selected insurance agents in the past, I bet you’ll find that it was the result of a referral, trade association recommendation or an aggressive solicitation on the part of the agent.

As the chairman and CEO of Cleveland-based Dawson Companies with more than 30 years of experience representing contractors of all types and sizes, I’d like to present a more analytical approach to the agency and insurance carrier selection process.

Beginning with the selection of your agent, I recommend a four-part evaluation to gauge the ability of competing agencies and brokers to represent your company.

Personnel

The first area to investigate is the firm’s personnel who will handle your account on a day-to-day basis. This includes the direct sales contact, customer service representative and any assistants to that representative, along with anyone else who will have contact with you from a client-service standpoint. The key question to ask, “Who will be the primary direct contact for my business?”

This seems simple enough, but you need to be certain that the person selling the insurance program and making the service commitments is the person that will be responsible for carrying out that program and those commitments. The primary concern

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is a situation where commitments and representations are made by a sales team, and then the service function is placed in the hands of a servicing team that may not be willing or able to meet the service standards that were sold to you. I strongly recommend that the person who is doing the selling also be the person responsible for overall performance of the service team.

Another question to be addressed, “What are the qualifications of the primary contact?”

Some areas that you might want to review would be the contact’s position within the insurance agency, the contact’s years of experience in commercial insurance, their education both inside and outside the insurance industry, and any professional designations they hold within the insurance industry.

Insurance coverages evolve on a daily basis, and lack of experience in the insurance industry is a sure sign that you may want to go elsewhere for your representation.

It also will benefit your business to find out who else rounds out the service team. Knowing who will back up the members of the service team when they are not available to assist you is crucial. As an example, when you call your representative to get a certificate of insurance and a license bond, and they are not available, is there someone there to step in immediately and get the paperwork for you?

Expertise and Industry Concentration

Once you have an understanding of whom you will be dealing with, the next area to cover is expertise and industry concentration. Don’t be afraid to ask what other companies in the hvacr industry the insurance agency represents. Expertise in the hvacr industry is a critical component to properly structuring an insurance program. An agent with expertise in your industry will not be afraid to refer you to other clients for references.

A good way to expose expertise, or lack of, is to question the agent’s trade group affiliations.

If the agent is active in trade associations that deal with construction and hvacr matters, the agent will probably have knowledge of and show commitment to your industry. This valuable knowledge will help properly prepare the agent to service an hvacr client.

Insurance agents are not all created equal, and they certainly do not have equality of work experience in your industry. In order to properly establish your program, the agent needs to know the right questions to ask that pertain to your specialty within hvacr.

For example, a heating and air conditioning contractor probably does not have the exposure to spoilage claims that a refrigeration contractor will have. The refrigeration contractor probably does not have exposure to mold damage claims that the air conditioning contractor will have. Agents who are not experienced in insuring hvacr contractors will not ask the right questions, and therefore will not be able to provide the best and most reasonable insurance program for your needs.

Providing service to a contracting firm is a daily responsibility and is quite different in its intensity when contrasted to the service needs of other industries. As an example, our experience has been that somewhere between 50% and 60% of all job contracts require our firm to make some type of wording change in our insurance policies. In turn, insurance policy restrictions may require that you request changes to your client contracts. Also, as you are aware, various types of licenses and permits or surety bonds may be required on a daily basis as well. All of these items highlight a need for a deep and responsive team at the insurance agency to service your needs.

Services

The next topic to investigate is the services that are offered by the insurance agency. While it may sound like a strange question, the first thing you should ask is if the agency itself has an internal staff that handles commercial claims. If the agency does not have a claims staff in-house, then adjustment of your claim will generally be left in the hands of the insurance carrier. You need a knowledgeable advocate on your side when a claim occurs. You would be surprised how many instances we find where the insurance company has misinterpreted the coverage, or interpreted the coverage to their advantage. When the agency has a staff that handles claims on a full-time basis they can save you thousands of dollars in loss adjustment costs. They also will have a much closer rapport with the insurance company adjusters than an agency that simply turns in the paperwork and lets the insurance carrier take over.

Additionally, you should find out if the agency has loss-control capabilities. A loss-control department will provide direct involvement with you to improve your operations from a risk and loss potential standpoint. An example would be providing an OSHA “mock” inspection to assist you in uncovering potential OSHA violations without actually having OSHA come on your site.

Another example would be infrared testing of some of your major projects before they go on line.

If claims departments and loss-control departments are included with the agency services, find out exactly what services they are providing free of charge and what are provided on a fee basis.

Most firms with loss-control departments operate that part of the company as a profit center and will often charge for the services. You should ask what services are provided free of charge by the insurance carrier. Also, you should be able to consult a Web site or a written listing of services that are provided for free. You should insist that the services to be provided are spelled out in writing and are understood by both parties.

Marketing

The final area to evaluate is the firm’s marketing process. In our industry the marketing process is the placement of your account with an insurance carrier. One of the most important factors in handling your insurance program will be the presentation of your account to the insurance carriers by your agent.

Ask for a list of the carriers represented by the agent on a direct basis. This could be very important in terms of future needs, as insurance carriers change their focus from time to time. The more markets the agent has the better their capabilities to handle your account in hard times. Should your carriers start to sour on the hvacr business, your agent must have additional, competitive markets available to you.

A good way to understand the agency better is to ask how much commercial insurance business they place with each insurance carrier.

The larger the volume an agency has with a carrier the more influence they should have with that carrier and that will normally result in better service to you.

Insurance pricing has flexibility and how your company is presented to the carrier is a significant part of this process. You should ask which carriers the agent will be working with to obtain your insurance coverages, and why they have chosen those carriers. They need to explain the selection process and the benefits that each carrier will bring to you.

Lastly, a very important question to ask, “What is your timetable to provide my insurance proposal?”

Renewals have fixed dates and you have the right to have your proposal in your hands in advance of that renewal date in order to make a proper decision. You should ask for the final proposals to be in hand no less than 10 working days prior to the renewal date, and that the proposal include all contingencies that will need to be faced in order to place the coverage.

Many purchasing decisions are based on price. That should be one factor, but what you are buying is day-to day account handling services and claims services. It makes good sense to include more than price in your decision-making process.

If you review each competing insurance agency as outlined above and utilize the subjective scorecard, on the following page. it may make the selection of your insurance agency and your insurance carrier a more manageable process.

SCORECARD
Firm Name: Primary Contact:
Category Poor Below 
Average
Average Above 
Average
Excellent
Personnel
1
2
3
4
5
Comments:
Expertise/Industry Concentration
1
2
3
4
5
Comments:
Services
1
2
3
4
5
Comments:
Marketing Process
1
2
3
4
5
Comments:
TOTAL SCORE:

Available Online
The scorecard above is available at www.hvacrbusiness.com/downloadcenter.


Articles by D. Michael Sherman

Key Questions Take Mystery Out Of Insurance

D. Michael Sherman is chairman and CEO of Cleveland-based Dawson Companies. He has more than 30 years of experience representing contractors of all types and sizes. He recommends a four-part evaluation to gauge the ability of competing agencies and brokers to represent your company.
View article.